Dutch Intellectual Property

Licensing Entities in the Netherlands

The Netherlands is not typically classified as an offshore financial center, with relatively high corporate tax rates of 25.8% imposed on global income (with a step-up rate of 19% applicable to the initial EUR200,000 of the taxable amount).

However, certain beneficial treatment of specific income types, combined with an extensive network of double taxation treaties (over 90 treaties to date, including most major developed nations), provides remarkable opportunities for utilizing Dutch corporations in structuring international financial transactions. Dutch companies can be strategically employed in various ways, including:

Dutch Holding Companies

Under specific conditions, a resident Dutch company can qualify for the “participation exemption,” which grants exemption from corporate tax on income and capital gains derived from holding or disposing of qualifying shareholdings.

Activities of a Dutch Licensing Company

 Dutch licensing companies are chiefly involved in receiving royalties from or on behalf of group companies. There are virtually no restrictions on the activities these companies can undertake. Licensing activities can be combined with holding, financing, or even operational activities such as trading or manufacturing.

The Dutch Royalty Conduit Company

This type of Dutch licensing company mainly focuses on receiving royalties on behalf of group companies. It typically does not own intellectual property rights but acquires licenses from group companies, subsequently sub-licensing them to other parties.

The owner of the intellectual property is usually a group company. To reduce the tax burden at the intellectual property owner’s level, it’s common for the company holding the IP (receiving royalties from the Dutch company) to be established in a jurisdiction with minimal or no taxation on IP income (a tax haven). The Dutch tax system facilitates the straightforward transfer of royalties to a tax haven company.

The ultimate licensee can be an unrelated party or a group company. This structure primarily aims to minimize foreign withholding taxes through applicable tax treaties or the EU Directive for Interest and Royalties.

The Dutch Patent Box

The Netherlands is recognized for launching its pioneering patent box in 2007.

Within this framework, known as the “innovation box,” taxpayers have the option, subject to specific conditions, to apply a reduced effective tax rate on taxable profits arising from these intangible assets. The effective tax rate within the innovation box stands at 9%.

The innovation box is applicable if a minimum of 30% of the profits have originated from a patent. Furthermore, companies that have incurred particular qualified research and development (R&D) expenses for the creation of intellectual property (IP) for which no patent has been granted also qualify for the favorable effective tax rate.

This lower effective tax rate solely applies to positive income, allowing for the full consideration of innovation-related losses. Moreover, it’s feasible to incorporate profits from an intangible asset generated during the period between patent application and patent grant into the innovation box regime (excluding R&D assets).